The world is on the brink of a new world order for global currency markets, according to a report by Victoria-based Custom House.
Mark Frey, Custom House’s regional director for corporate Canada, suggested in a report released Thursday morning that the market’s bias toward further quantitative easing by the U.S. Federal Reserve will increase the risk for both a panic-inspired sell-off of the U.S. dollar as well as a subsequent bounce for the greenback.
Such a large currency movement would affect currencies worldwide including the Canadian dollar.
While the build up of speculative positions in currency markets is still relatively modest, according to the official Commitment of Traders report, Frey noted that big, fast money does not trade through a regulated exchange.
“Hedge funds, banks and proprietary traders primarily execute via the [over-the-counter] market through a vast network of banks, brokerages and clearing houses,” he said, adding the market is shorting the U.S. dollar to a historic degree.
According to the Bank of Canada, the Canadian dollar was trading at US$0.9964 at press time.